We learn how to understand the difference between equity value vs enterprise value, and the enterprise value formula through a step-by-step example.

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In this video, we break down the difference between enterprise and equity value, how to calculate one using the other, and what each of these metrics means in finance. We use two examples to practice calculating and discussing valuations and deals.

Often you’ll hear equity value and enterprise value used interchangeably, but the truth is that they are not interchangeable. Often people are selectively choosing the metric that makes their deal sound better, so you need to have a really strong understanding of both metrics to be able to decipher the truth for yourself.

Another thing I’d like to highlight is that for some reason finance people cannot explain enterprise value in a simple and transparent way. This makes it a hard metric to learn and understand conceptually. I try to explain this in a more straightforward way in this video.

We also discuss the enterprise value formula in detail, how to calculate it forwards and backward, as well as a few examples of enterprise value to EBITDA vs. equity value to EBITDA multiples so you can start to understand how different types of companies may favor one metric or the other.

By the end of this video, you’ll have a great understanding of equity vs. enterprise value calculations!

If you have questions – please leave a comment below and I’ll try to help. Cheers!

#enterprisevalue #equityvalue #enterprisevalueformula
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This video explains the concept of a firm’s enterprise value, provides an equation to calculation enterprise value, and illustrates the calculation with an example.
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